US Markets continued to hover around the record highs. S&P was up 0.3% and set another record while Nasdaq was broadly flat. Materials and Industrials up 1% led the gains, while Energy was down 1.7%. FOMC minutes did not give much clues on tapering of asset purchases. US 10Y Treasury yields dipped another 4bp to 1.31% – the lowest since February. European indices advanced with The European Commission upping GDP growth forecasts to 4.8% from 4.3% for 2021 and 4.5% from 4.4% for 2022. The DAX, FTSE and CAC were up 1.2%, 0.8% and 0.3% respectively. US IG and HY CDS spreads widened 0.4bp and 1.7bp respectively. EU main and crossover CDS tightened 0.2bp and 2bp respectively. Saudi TASI and Abu Dhabi’s ADX were down 0.1% and 0.2% respectively. Brazil’s Bovespa was up 1.5%. China continues to increase its regulatory oversight over the companies listing in the US as Chinese companies’ shares and ADRs are under pressure. Ride-hailing app Didi’s shares have fallen over ~20% in the few days. Asian markets opened in the red – Nikkei and Shanghai down 0.6% HSI down ~2% and Singapore’s STI down 0.5%. Asia ex-Japan CDS spreads were 1.9bp wider.
New Bond Issues
Mitsubishi $ 5Y bonds at T+75bp area
Eastern Air Overseas S$ 5Y SBLC-backed note at 2.4% area
Beijing Capital Development Holding $ 5Y at T+300bp area
Xiaomi raised $1.2bn via a dual-trancher. It raised $800mn via a 10Y bond at a yield of 2.975%, 35bp inside initial guidance of T+200bp area. It also raised $400mn via a 30Y green bond at a yield of 4.159%, 40bp inside initial guidance of T+260bp area. The bonds have expected ratings of Baa2/BBB-/BBB, in-line with the guarantor, and received orders of over $7bn, 5.8x issue size. Wholly-owned subsidiary Xiaomi Best Time International is the issuer and the bonds will be unconditionally and irrevocably guaranteed by Xiaomi.
Lufthansa raised €1bn ($1.2bn) via a dual-trancher. It raised €500mn ($600mn) via a 3Y at a yield of 2.25%, 25bp inside initial guidance of 2.5% area. It also raised €500mn ($600mn) via an 8Y bond at a yield of 3.75%, ~18.75bp inside initial guidance of 3.875%-4% area. The bonds have expected ratings of Ba2/BB- and received orders over €1.9bn ($2.3bn). Proceeds will be used to strengthen liquidity.
Zhejiang Expressway raised $470mn via a 5Y bond at a yield of 1.638%, 45bp inside initial guidance of T+130bp area. The bonds have expected ratings of A/A+, and received orders over $4.9bn, 10.4x issue size. Proceeds will be used for general corporate purposes and for debt refinancing. The issuer is the largest listed toll-road operator in China in terms of total assets and net profits, as per IFR.
Dukhan Bank raised $500mn via a Perpetual non-call 5.5Y (PerpNC5.5) AT1 Sukuk at a profit rate of 3.95%, 42.5bp inside initial guidance of 4.375% area. The bonds are unrated. The issuer is Dukhan Tier 1 Sukuk Ltd. The first call date is on July 14, 2026 and first reset date is on January 14, 2027. If not called by the first reset date, the profit rate resets then and every five years thereafter to the 5Y Treasury yield + 308.1bp. The bonds have a dividend stopper until one profit payment has been paid in full (or set aside). A non-viability loss absorption would occur at the regulator’s discretion with a partial write-down.
China Modern Dairy Holdings raised $500mn via debut 5Y bond at a yield of 2.18%, 30bp inside the initial guidance of T+170bp area. The notes have an expected rating of BBB and booked over $1.6bn, 3.2x the issue size. Proceeds will be used for refinancing and general corporate purposes.
New Bond Pipeline
- Fujian Investment & Development Group hires for $ bond issuance
- Transocean Ltd. Upgraded To ‘CCC’ By S&P On Improved Liquidity, Outlook Negative; Debt Ratings Raised
- Fitch Upgrades Navistar IDR to ‘BBB-‘ on Acquisition by TRATON; Withdraws Ratings
- Southwest Airlines Co. Outlook Revised To Positive By S&P From Negative, ‘BBB’ Rating Affirmed On Improving Demand
- Moody’s changes Braskem’s outlook to stable from negative; affirms Ba1 ratings
- Frigorifico Concepcion S.A. Outlook Revised To Positive From Stable By S&P; Proposed Senior Bonds Assigned ‘B’ Rating
- Fitch Revises Outlook on Fantasia to Negative; Affirms at ‘B+’
- Fitch Rates Frigorifico Concepcion ‘B+’; Outlook Stable
Term of the Day
Mitch Reznick, head of sustainable fixed income at Federated Hermes
“With companies like Enel, which are committing to make more and more of their debt sustainability linked, then the penalties for missing targets start to become increasingly material,”
“That’s the reality, but it doesn’t change the pricing policy,”; He added that increases were necessary due to the high price of oil in global markets and emphasized that all price increases are made for technical reasons, based on future prospects for supply and demand.